IBM to shed up to 13,000 staff

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US computer giant IBM has announced it plans to shed up to
13,000 employees worldwide as part of a restructuring focused on
its struggling European operations.

The company nicknamed "Big Blue", having shocked Wall Street
with disappointing earnings figures last month, signalled that the
job cuts were part of efforts to reinvent itself after it ditched
its personal computer unit.

In a statement issued just after the New York stock exchange
closed, IBM said it foresaw reducing its 329,000-strong workforce
through "voluntary and involuntary" cuts of 10,000 to 13,000
employees worldwide.

The restructuring will incur a pre-tax charge of $US1.3
billion-1.7 billion in the second quarter of the fiscal year,
before the plan starts to pay off financially in the second half of
2005, IBM said.

"The majority of the overall workforce reductions are planned
for Europe, and the company has initiated discussions of these
changes with local consultation bodies," it said.

The firm signalled that it will dismantle its management
structure in "slower-growth" Europe by deploying more consultants
in the field to get closer to businesses in need of technology
advice.

It said the success of the revamp depends "on reducing
bureaucracy and infrastructure in lower-growth countries and
creating teams that can work across country borders."

"This eliminates the need for a traditional pan-European
management layer to coordinate activity. As a result, IBM will
create a number of smaller, more flexible local operating units in
Europe to increase direct client contact."

IBM is grappling to reposition its core business away from PCs.
Its share price slumped after it reported first-quarter net
income of $US1.4 billion or 85 cents a share last month, well down
on analysts' forecasts for earnings of 90 cents a share.

Sales were especially weak in Japan, Germany, Italy and France,
which contribute about a quarter of IBM's revenue.

Sales growth in IBM's global services business, which account
for more than half of the company's total revenues, was just six
percent in the quarter.

Markets expected some kind of restructuring from IBM after the
first-quarter earnings figures jolted the company to hasten a
review of its strategic direction. In after-hours trading, IBM
shares rose 77 cents to $US77.85.

IBM chief executive Sam Palmisano said at a shareholders'
meeting in April that the firm was working to "move people and
resources out into the field, closer to clients."

On Sunday, IBM wrapped up a $US1.75-billion deal to sell its PC
division to Chinese computer maker Lenovo, in a startling sign of
both IBM's transformation and of China's emergence onto the global
stage.

Palmisano has also sold the IBM unit responsible for making
hard-disk drives, to focus the company on its more lucrative
software, service and consulting markets.

Yet growth in those areas has flagged, and analysts expect IBM's
profit to fall slightly this year with sales seen rising less than
five percent.

Europe has been a particular sore point for the Armonk, New
York-based company. Although IBM did not spell out where in Europe
the axe would fall, local press reports have said the bulk is
expected in Britain and Germany.

"This really shouldn't be seen as a surprise," said Bob
Djurdjevic, president of Annex Research.

"What this is really about is reducing costs and centralising
their European efforts. It's a good thing to take out layers of
bureaucracy," he said.